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Shop-Vac rebounds in Pa. under Chinese ownership after near-death experience

Andrew Maykuth, The Philadelphia Inquirer on

Published in Business News

Gary DuBoff, the chief executive of GreatStar Tools USA, said his company saw the Shop-Vac acquisition as a rare opportunity to acquire a brand so well-known that its name is synonymous with all wet-dry vacs. Though many people doubted him, Duboff said GreatStar never considered dismantling the company.

"Once they found out who GreatStar was, I don't think anybody believed that this thing wasn't going to close down and move to China and that would be the end of it," said DuBoff. "But that was never our plan. We all along wanted to make this more or less a U.S. manufacturing base and to try and bring it back to its former glory."

DuBoff, who grew up in Northeast Philadelphia and got a communications degree from Penn State, said he encountered similar concerns four years ago when GreatStar acquired Arrow Fastener in Saddle Brook, N.J., where he was president.

At the time, GreatStar told him it only wanted to buy the company if the management team, the employees, and the plant were part of the deal. Under Chinese ownership, he said, nothing really changed in the way Arrow Fastener operated.

"Basically they said to me, 'We are not as familiar with operating a business in the United States as we are outside, so we are relying on the team's expertise to continue to run this business successfully,'" said DuBoff. "And to their credit, they have absolutely adhered to that. We do not have culture clashes because they don't really operate the day-to-day business."

GreatStar's owner

GreatStar Tools USA is owned by Hangzhou GreatStar Industrial Co. Ltd., which describes itself as a leading manufacturer of hand tools in Asia serving markets worldwide. It was founded in 1993 by Qiu Jianping, 59, an entrepreneur who has a master's degree in engineering. Qiu also controls Hangcha Group, one of China's largest suppliers of forklift trucks and parts.

About $974 million, or 71%, of Hangzhou GreatStar's $1.4 billion in 2020 sales were made in the United States, according to the company's annual report. Though its shares are traded on the Chinese stock exchange, Qiu and his family own a controlling interest. Qui is listed as a multibillionaire by Forbes.

Lawrence said Qiu sometimes sends emails containing broad guidance for the company but is "very much hands-off."

GreatStar seems to be following what it called a "glocal" approach to the U.S. market, in which the parent company takes a global role for strategy and direction but leaves operational decision-making to local managers, said Charles J. Skuba, professor of the practice at Georgetown University's McDonough School of Business.

 

"They seem to be bent on this local management approach to the U.S. market, which seems to be pretty smart," said Skuba.

But Skuba also cautioned that the early stages of foreign direct investment "are always the stage of big promises" and that the hand-tool industry does not have huge growth prospects. There likely will be some consolidation and reductions at Shop-Vac as GreatStar optimizes costs among its various operating units.

Lawrence acknowledges that Shop-Vac is unlikely to employ the 400 people who worked in Williamsport before last year, nor the 1,700 employees worldwide before it closed. GreatStar Tools USA will take over some of the marketing and distribution — it maintains sales offices near the headquarters of major retailers like Lowe's, Home Depot, and Walmart to service its big retail customers.

And Shop-Vac will consolidate operations in Williamsport from three buildings to two, and is looking to sell surplus vacant properties it owns in Canton, Pa., and in Binghamton, N.Y., where the previous owners manufactured motors for its vacuums before relocating that business to Asia several years ago.

Lawrence said Shop-Vac will continue to produce motor assemblies for all of its vacuums in Asia, and it will also continue to produce small Shop-Vacs — under four gallons — in China or in Vietnam to reduce tariff costs. Those smaller household vacuums sell at a lower profit margin, and they can still be produced in Asia at a lower cost.

"The only way we're going to be able to rebuild this company is to be smart," said Lawrence. "Obviously we're going to need workers to do that. But we're going to be more efficient about how we do things."

The alternatives could be worse, according to Skuba, the Georgetown business expert:

"It's much better to be acquired by somebody who wants to expand in the marketplace," he said, "than by somebody who's going to strip you of your assets and reduce overhead."

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